At Plexxi – fifth startup. Blogging since '06. Prior stops: 4 start-ups, 4 public companies and 4 years in investment management. I started in networking during the 5.25 inch disk era. I will probably write stuff you do not understand. I have been told I do not make people comfortable; deal with it. This is my personal blog and does not reflect the opinions of my employers.

Category Archives: MSFT

Over the weekend my 80 year old father sent me an email asking for advice regarding upgrading his Samsung feature phone to a smartphone. Apparently my sister had suggested a Droid and my brother an iPhone and my dad was thinking Blackberry. I replied to his email asking him why he wanted to upgrade, how he intended to use the device and what is in the new device budget. My dad is not an early adopter of the latest technology trends, but his is not illiterate either. Below is a picture of him from the Korea War when America was still using exchange name calling codes in a two letter five digit format.

He replied that he did not know what social networking is, but he would like to talk on the phone, read email and text. He has never sent a text message. That forced me to think about what kind of device to recommend. His current feature phone was designed to be a phone. When the engineers at Samsung designed the clamshell phone my dad is carrying their first design objective was to build phone for talking. The phone has a text message function, but with a standard telephone keypad it is really not a texting device if you are over 18. As a phone for talking, the Samsung device is great. The battery lasts for days, rarely drops a call and it is small and easy to carry.

When the engineers at Apple designed the iPhone, their first thought was to design a mobile computing platform that leverages the Apple OS. They then thought to put a voice application on it and call it a phone. That is much different design path than the Samsung engineers who designed a phone and thought to add some text functions.

I have been carrying a Blackberry device since 2000. It was not always a phone, but it has always handled email. That was the magic of the Blackberry. The engineers at Blackberry said let’s design a mobile email device that uses the cellular network. Then they made it a phone and after that they decided to make it web device. It was the step beyond email and phone where Blackberry stumbled. Today, there is no magic to email on a mobile device.

Nokia made a colossal set of mistakes, but the biggest like Blackberry was losing the innovation war to Apple and buying Symbian. Symbian was a great operating system for the feature phone era – but it failed in the smartphone era.

Motorola or MMI as they are now called simply stopped innovating. They fell behind the other device leaders after failing to replace the magic of the Razr and had to recruit a new CEO a few years ago out of QCOM named Sanjay Jha. I have met Sanjay many times and I give him credit as he realized the market for mobile devices was going to be a product development marathon. Product cycles will matter. Miss a product cycle and it becomes hard to catch up. That is what is happening to RIMM in the present year. When Sanjay took over he knew he needed an OS that would be a winner and he chose Android. The whole mobile device market really comes down to three operating systems: Android, Windows Mobile and iOS.

HTC embodies the concept of product development as a marathon. They are a product development machine with phones on Windows Mobile or Android. Samsung and Sony-Ericsson are another two developers of smartphones who have seen the light and are now using Android or Windows Mobile.

The business model in the handheld mobile device space is to pick an OS: Android or Windows as iOS is not available for license and webOS (developed by Palm now owned by HPQ) is really a cool OS, but very small amount of market share. Next you need to develop a nice user interface (UI) to go on top of your OS. Hire some excellent hardware, packaging engineers, use the latest chips from QCOM, STM, IFX, BRCM, then build a device, find market distribution and off you go. This is a somewhat long answer by me to the Edlar Murtazin blog post today speculating that MSFT will by NOK’s device business. If I was NOK and MSFT wanted to buy it, I could not sign the paperwork fast enough. If I was MSFT, why would I want a mobile device business? I have a mobile operating system business. Which is more valuable? I think the later and we can debate if MSFT is executing well, has leverage, blah, blah, blah.

When I first saw the iPad I was a bit skeptical. I had accurately guessed the price at $499, but I was not certain it was a game changer. Then I used the iPad. I now have three in my family and it is an amazing device. I am still carrying an almost two year old Blackberry 8900 as a phone, because it works well as phone and I really see no need to get a new phone now that I have an iPad. I am also a T-Mobile customer and have been one since 2002. I am waiting to see if the merger with ATT goes through, what my options are post closing before making any new device or service provider choice.

Back to my advice to my dad who is a Verizon customer. I told him to look at the iPhone as well as the Droid Incredible and the Thunderbolt by HTC. As the weekend wore on I realized I might have given him the wrong advice. Why does he need a smartphone? The few times he makes a call, he has the perfect phone today. If he loses the small Samsung phone no one would care. It was free. Get another one. What my dad really needs is an iPad with 3G. That is the game changer. When I came to this conclusion my next thought was what does this mean for the stocks in the mobile space?

Here are a six ten year charts to look at. I think these charts tell you where the mobile device market is going. Ten year weekly charts are nice because they diffuse the daily noise effect from rogue bloggers. The other option is read the thousands of pages of research published annually on the mobile device market. I just think it comes down to who is making cool devices, who can keep making cool devices and who are the companies that are making parts for the makers of cool devices. Product cycles matter. They always matter. Buy stocks in positive product cycles and short stocks in negative product cycles. Anymore thought beyond that last sentence is too much thought. People need to let their over analysis go, it is not that hard to figure out and you do not have to calculate RIMM’s earnings if they sell a few more devices in Chile because the 12-18 demographic likes the BBM. It is not that hard. Product cycles always tell the truth:

NOK: Here is the poster child chart for missing a product cycle. I marked the introduction of the iPhone, but it should also be noted that between 2006 and 2008, NOK spent a lot of time in legal battles with QCOM. I wonder how much this distracted the management team when AAPL was readying the iPhone. I think the stock will bounce around the bottom for awhile. I simply do not understand the people who want to bullish on a company in this much turmoil as if a windows phone in Q3, or Q4 or Q1 is going add $20 to the stock.

RIMM: The recent close below the bottom trend line is not good. Will this chart go the way of NOK? Missing product cycles really sucks.

AAPL: This is called a positive product cycle company.

MOT: There is no chart for MOT as it is two companies now and the current data set for MMI and MSI is limited.

QCOM: Over the past 3.5 years, I have met with this company many times. These were very trying times for the company and the stress showed on the management team. The chart really does reflect that distraction of the various lawsuits both to investors and management. Those distractions are now behind the company and the recent breakout is very bullish.

MSFT: Last week’s close was not good for MSFT. I would be watching it here. I see many reasons why the company is in a negative product cycle, but I am more inclined to say this is being priced into the stock and it sets up for a buy in the 2H 2011. Time will tell.

GOOG: No ten year chart here, but a nice series of higher highs and higher lows. As with MSFT, last week’s close not positive, but I like how the company is setup.

/wrk

** It is all about the network stupid, because it is all about compute. **